Geo-political posturing and pipeline politics: Turkey as an energy hub

Dr. Can Erimtan is an independent scholar residing in İstanbul, with a wide interest in the politics, history and culture of the Balkans and the Greater Middle East. He attended the VUB in Brussels and did his graduate work at the universities of Essex and Oxford. In Oxford, Erimtan was a member of Lady Margaret Hall and he obtained his doctorate in Modern History in 2002. His publications include the book “Ottomans Looking West?” as well as numerous scholarly articles. In the period 2010-11, he wrote op-eds for Today’s Zaman and in the further course of 2011 he also published a number of pieces in Hürriyet Daily News. In 2013, he was the Turkey Editor of the İstanbul Gazette. He is on Twitter at @theerimtanangle

The past decade has seen amazing growth in economic terms and
this booming economy necessarily led to greater political clout –
a situation relished by Tayyip Erdogan, who has been acting
accordingly ever since. His moment in the sun at Davos five years
ago, when he defiantly walked out on Israel's President Shimon
Peres, launched him into the global limelight, turning him into a
hero for many disenfranchised Muslims worldwide and transforming
him into a global leader of some import. But is the Turkish
economic miracle, constituting the base of this new political
power, a reality or merely a chimera?

Over the past ten years, Turkey has enjoyed an average economic
growth rate of 5.2 percent a year, a trend which started to waver
in 2011 according to Fadi Hakura, Turkey analyst at the
London-based think tank, Chatham House. In fact, the economic
boom was built with the income provided by the ruthless
privatization program instituted by the AKP government. Speaking
on the radio station Voice of Russia recently, Hakura explained
that the AKP-led privatizing drive was a "revenue maximizing
privatization," making large amounts of cash readily
available to invest in all kinds of profitable ventures,
particularly property development and real estate.

The Turkish economy nearly quadrupled in size, an incredible
growth rate realized on account of an "epic boom in
consumption and construction that led to the building of
countless malls, skyscrapers, and ambitious infrastructure
projects," as expressed by the eerily prescient Jesse
Colombo. Will this boom now lead to a necessary bust? One cannot
but notice that the inventory of unsold housing units currently
stands at about 1.5 million, a list that was "close to zero
several years ago" and Colombo talks of "Turkey's Bubble
Economy."

As a result, Turkey's leaders are now scrambling for alternative
sources of income, as the state has nearly run out of products to
sell. And in this context, Turkey's unique location readily
springs to attention. Situated right next to the hydrocarbon
oasis that is the Arab (and Iranian) Middle East, Turkey is now
trying to capitalize on its share in Pipelineistan to turn itself
into a veritable energy hub on the crossroads between East and
West. In this respect, Turkey's development of close ties with
northern Iraq's KRG (or Kurdish Regional Government) appears
crucial.

Hard alternatives

In an earlier piece, I alluded to the happy confluence of Turkey's domestic
policy towards its native Kurdish minority in the South-East of
the country and the AKP's overtures towards Nechervan Barzani,
the KRG's prime minister, and the subsequent lucrative oil deal.
Since December last year, the KRG has been transporting its oil
into Turkish territory, about 100,000 barrels a day. Once
received by the Turkish side in the oil terminal of Ceyhan, the
oil was stored locally. But now the terminal's depots are close
to overflowing. Given the Bush invasion of Iraq, and US interests
in the region, Washington has in the past repeatedly criticized
Ankara for excluding Iraq's central government in Baghdad in any
energy cooperation with Erbil. In effect, compounding matters,
Turkey has now unilaterally decided to start selling the stored
Iraqi (or should that be, Kurdish) oil on the international
market.

On Friday, May 23, 2014, the Baghdad government protested against
Turkey's willingness to sell the oil originating from the KRG,
claiming that such a sale would be counter to international law
as well as being in violation of the Iraqi constitution. An
official from the Turkish Ministry of Energy then declared that
"Turkey will continue to sell the Kurdish oil in accordance
with international and Iraqi laws. The oil will not be sold with
long-term agreements but with monthly tenders, because Turkey and
[the] KRG want to assure all parties interested in the sale about
the amount of the exported oil."

As Baghdad is clearly afraid of losing a substantial share of the
accruing revenue, the Turkish government stated that the KRG as
well as Iraq's central government had both been duly notified,
adding that "Turkey guarantees the revenue will be shared in
a way which is dictated by the Iraqi constitution." In this
way, Turkey is clearly attempting to persuade Iraq that its
territorial integrity is of grave concern to the AKP,
particularly in view of the fact that a fully independent KRG
would constitute a dangerous precedent that could move Turkey's
Kurds towards their own demands for autonomy, or even
independence. Nevertheless, the Baghdad government filed for
arbitration against Ankara at the Paris-based International
Chamber of Commerce. The Iraqi government, headed by President
Jalal Talabani and Prime Minister Nouri al-Maliki, issued the
following statement: "By transporting and storing crude oil
from Kurdistan [or the KRG], and by loading that crude oil onto a
tanker in Ceyhan, all without the authorization of the Iraqi
Ministry of Oil, Turkey and BOTAS [Turkish Petroleum Pipeline
Corporation] have breached their obligations under the
Iraq-Turkey Pipeline Agreement."

Sharer’s problem

Speaking on Sunday, May 25, Turkey's Minister of Energy and
Natural Resource Taner Yıldız maintained that "the oil and
revenue belong to Iraq. The revenue gathered in [the Turkish
state-owned] Halkbank will be equally shared. In this sense, what
will be done is in parallel with what our Iraqi people decide.
That is why we cannot have any deeds against agreements. We
believe that there is and will be nothing contradicting the
agreement." The Minister clearly wants the oil sales to
proceed, as income must be generated for Turkey. On May 22, 1
million barrels of Kurdish (or Iraqi) oil were sold to German and
Italian refineries, in spite of Washington and Baghdad making
loud disapproving noises. Thus, Turkey appears to be forging
ahead, determined to become a veritable and highly profitable
"energy hub on the crossroads between East and West."

Turkish officials must be licking their fingers at the prospect
of being able to sell Iraq's oil, emanating either from
territories controlled by Erbil or from fields run by Baghdad,
possibly remembering then-US Deputy Defense Secretary Paul
Wolfowitz and his 2003 announcement that Iraq is a "country
[that] swims on a sea of oil." The International Energy
Agency (IEA) famously predicted some time ago that Iraqi oil
production would double by 2020, a sentiment echoed by the
International Monetary Fund (IMF), actually saying that Iraq
could expect nearly $5 trillion in revenues from oil exports
before 2035. These optimistic assessments probably go a long way
towards strengthening Turkey's resolve to be the preferred
conduit for the regional branch of Pipelineistan.

In fact, looking for other means of procuring much-needed revenue
now that the privatization bubble is about to burst, Ankara has
set its sights on Turkmenistan, the "sixth largest natural
gas reserve holder in the world" with proven stocks of
approximately 265 trillion cubic feet (Tcf), as announced by the
IEA. At the moment, Turkmenistan primarily exports its natural
gas to China (about 20 billion cubic meters (bcm) annually
according to the news agency Reuters), Russia, Iran and other
Central Asian nations; but selling Turkmen gas to Europe via
Turkey would seem like an option that would be very favorably
received in Brussels as well as in Ankara. This would involve
pipelines crossing the Caspian Sea into Azerbaijan, and then
onwards via Georgia to Turkey – a route similar to the 1,768
kilometer Baku-Tbilisi-Ceyhan (BTC) pipeline inaugurated in 2005.
And with this prospect in mind, Turkey's wily foreign policy
chief, Ahmet Davutoğlu, went to Azerbaijan's capital of Baku on
Monday, May 26. The foreign ministers of Turkey, Azerbaijan
(Elmar Mammadyarov in charge of Azeri foreign affairs since
2004), and Turkmenistan (Raşit Meredow taking care of
Turkmenistan's external relations since 2001) held a meeting
there to discuss matters of interest, particularly the
construction of a trans-Caspian pipeline, the first requirement
for realizing gas exports to Europe. As such, this tripartite
meeting comes on the heels of an announcement made in November
last year, when the head of the EU mission in Ashgabat, Denis
Daniilidis, told an oil and gas conference in the Turkmen capital
that negotiations for a project to pump Turkmen gas towards
Europe were already underway.

The EU is thus trying to utilize Turkey in its attempts to lessen
its dependency on Russian gas imports. But Turkey, on the other
hand, is more than determined to achieve its own goals
irrespective of European or other objections, and is in that
respect not afraid to come to an understanding with Russia. In
view of the current crisis in the Ukraine, Russia's Vladimir
Putin recently declared that Gazprom would probably choose a
non-EU member to realize the $20 billion South Stream pipeline
project. As the trouble with Ukraine really seems to have started
with the EU and NATO’s attempts to lure Kiev into its own web,
thereby lessening Russia's energy hold on the European block,
Putin's decision to relinquish the Bulgarian and Greek route
seems understandable and that the alternative could instead be
Turkey appears equally reasonable – particularly, now that the
European Parliament even passed a non-binding resolution calling
for the South Stream’s cancellation last April. In an apparent
exercise to sow confusion, the EU Energy Commissioner Guenther
Oettinger recently said on the record that the South Stream
pipeline "is not a problem for me. We don’t want to block it,
but it does not have priority either." At the moment, the
so-called Blue Stream pipeline under the Black Sea supplies
Turkey with Russian gas (after all. Turkey's own gas needs are
met by Russia and, to a lesser extent, Iran). Sergey Glebov, a
professor of international relations at the Odessa Mechnikov
National University in Ukraine, opined that "it looks like Turkey
and Russia may expand the capacity of the Blue Stream, or build a
parallel pipeline to the coast of Turkey." As such, Gazprom's
Deputy Chairman Alexander Medvedev visited Turkey on April 22 and
met with Energy Minister Taner Yıldız. Subsequently, Yıldız told
the Turkish press that they discussed a new route for the South
Stream pipeline, a way that would guarantee Europe's future
energy security.

At the same time, Turkey's own energy needs should not be
discounted either, as the country spends about $60 billion
annually importing oil and gas, primarily from Russia and Iran.
And in this context, it is interesting to note that Iranian
President Hassan Rouhani is set to visit Turkey on June 9, 2014,
when negotiations will be undertaken in an attempt by Turkey to
lower the price of gas. Arguably, Turkey will now have a stronger
bargaining position as a result of its new rapprochement to the
Gazprom Nation. In the end, it seems that, what I earlier termed,
Turkey's pseudo-Ottoman policy of attempting to integrate the
"erstwhile Ottoman hinterland into the mainstream of Turkish
politics today" by means of strong commercial and economic
ties and interactions, will now also guide Turkey on its way to
become an "energy hub on the crossroads between East and
West," uniting Iraq, Azerbaijan, Turkmenistan, Russia, and
Europe in the process.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.